What GAO Found
United States Government Accountability Office
Why GAO Did This Study
H
ighlights
AccountabilityIntegrityReliability
October 2009
TROUBLED ASSET RELIEF PROGRAM
One Year Later, Action
s
Are Needed to Addre
ss
Remainin
g
Tran
s
parency and AccountabilityChallen
g
e
s
Highlights of GAO-10-16,a report to
congressional committees
Over the last year, TARP in general, and the Capital Purchase Program (CPP)in particular, along with other efforts by the Board of Governors of theFederal Reserve System (Federal Reserve) and Federal Deposit InsuranceCorporation (FDIC), have made important contributions to helping stabilizecredit markets. To illustrate, figure 1 shows that while it is difficult to isolatethe impact of TARP, the TED spread—a key indicator of credit risk thatgauges the willingness of banks to lend to other banks—has narrowed tolevels not seen since market turmoil began in late 2007. However, TARP is stilla work in progress, and many uncertainties and challenges remain. Forexample, while some CPP participants had repurchased over $70 billion in preferred shares and warrants as of September 25, 2009, whether Treasurywill fully recoup TARP assistance to the automobile industry and AmericanInternational Group Inc., among others, remains uncertain. Moreover, other programs, such as the Public-Private Investment Program and the Home Affordable Modification Program (HAMP) are still in varying stages of implementation.
Fi
g
ure 1: TED
S
pread, 3-Month LIBOR, and 3-Month Trea
s
ury Bill Yield, a
s
of
S
eptember 29,2009
012
3
456200920082007Interest ratesYear
LIBOR3-month Tre
as
uryTED
s
pre
a
d
S
ource: GAO
a
n
a
ly
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i
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of d
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t
a
from Thom
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on Reuter
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freeze
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tment fund
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.M
a
jor b
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nk
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begin to write down
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ubprime mortg
a
ge lo
ss
e
s
.FDIC t
a
ke
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over IndyM
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c.Lehm
a
n b
a
nkruptcy;Merrill Lynchpurch
as
e
a
nnounced.W
as
hington Mutu
a
l clo
s
ed byOffice of Thrift
S
upervi
s
ion.
CPP announced alongwith Federal Reserveand FDIC programs.
Citigroup receive
s
a
ddition
a
l government
ass
i
s
t
a
nce.B
a
nk of Americ
a
receive
s
a
ddition
a
l government
ass
i
s
t
a
nce.
Capital AssistanceProgram StressTest resultsreleased.
Be
a
r
S
te
a
rn
s
receive
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emergency lo
a
nfrom Feder
a
l Re
s
erve through JPMorg
a
n.F
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nnie M
a
e
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nd Freddie M
a
cpl
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ced into con
s
erv
a
tor
s
hip.
Note: Rates and yields are daily percentages. The area
b
etween the LIBOR and Treas
u
ry yield is theTED spread.
As of September 25, 2009, Treasury had disbursed almost $364 billion in TARPfunds; however, Treasury has yet to update its projected use of funds for most programs in light of current market conditions, program participation rates,and repurchases. Without more current estimates about expected uses of theremaining funds, Treasury’s ability to plan for and effectively execute the nextsteps of the program will be limited. Amid concerns about the direction andtransparency of TARP, the new administration has attempted to provide a
GAO’s eighth report assesses theTroubled Asset Relief Program’s(TARP) impact over the last year.Specifically, it addresses (1) theevolution of TARP’s strategy andthe status of TARP programs as of September 25, 2009; (2) theDepartment of the Treasury’s(Treasury) progress in creating aneffective management structure,including hiring for the Office of Financial Stability (OFS),overseeing contractors, andestablishing a comprehensivesystem of internal control; and (3)indicators of TARP’s performancethat could help Treasury decidewhether to extend the program.GAO reviewed relevantdocumentation and met withofficials from OFS, contractors,and financial regulators.
What GAO Recommend
s
While Treasury has been generallyresponsive to GAO’s prior 35recommendations, GAO reiteratesthe importance of fullyimplementing several previousrecommendations. GAO also makesthree new recommendations.Specifically, the Secretary should(1) coordinate with the FederalReserve and FDIC to help ensurethat the decision to extend orterminate TARP is considered in abroader market context, (2)document and communicate theresults of its determination, and (3)update its projected use of funds.Treasury agreed with the first tworecommendations. With the third, itstated
that
Treasury regularlyre-evaluates its funding needs.However, GAO found that athorough review of its estimates iswarranted.
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